It has been about a month since the last earnings report for Celestica (CLS). Shares have lost about 1.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Celestica due for a breakout? Well, first let's take a quick look at the most recent earnings report in order to get a better handle on the recent catalysts for Celestica, Inc. before we dive into how investors and analysts have reacted as of late.
Celestica Beats Q2 Earnings Estimates on Solid Top-Line Growth
Celestica recorded strong second-quarter 2025 results with adjusted earnings and revenues beating the respective Zacks Consensus Estimate.
The Toronto-based electronics manufacturing service provider reported healthy year-over-year revenues backed by robust expansion in the Connectivity & Cloud Solutions (CCS) segment. Management’s emphasis on innovation, product diversification and AI advancements is a key growth driver. Solid growth in free cash flow is a tailwind.
Net Income
Quarterly net earnings were $211 million or $1.82 per share, up from $95 million or 80 cents per share in the year-ago quarter. The more than two-fold growth in GAAP earnings was primarily attributable to top-line improvement.
Non-GAAP net earnings improved to $161.2 million or $1.39 per share from $108 million or 90 cents per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 15 cents.
Revenues
Quarterly revenues were $2.89 billion, up 21% year over year, led by healthy demand in the CCS segment. The top line exceeded management’s guidance of $2.575 billion-$2.725 billion and beat the Zacks Consensus Estimate by $223 million.
Quarterly Segment Results
CCS: Total revenues in this segment improved 28% year over year to $2.07 billion, primarily driven by strong demand in the Communications end market. The segment accounted for 71.6% of the company’s total revenues in the second quarter.
Revenues in the Enterprise end market declined 37% year over year to $433 million in the second quarter. The Communications end market reported 75% revenue growth to $1.64 billion, with solid growth in the hardware platform solutions portfolio backed by hyperscaler customer demand for networking products, including 400G switches and 800G switches. The segment’s operating income increased to $171 million (up 50%) with a margin of 8.3% (up 130 bps), driven by greater operating leverage and improved mix.
Advanced Technology Solutions (ATS): The segment’s revenues were $819 million (up 7%), accounting for 28.4% of total revenues in the second quarter. The segment’s operating income increased 24% year over year to $44 million with a margin of 5.3% (up 70 bps).
Cash Flow & Liquidity
In the reported quarter, Celestica generated an operating cash flow of $152.4 million compared with $99.6 million in the year-ago quarter, bringing the respective tallies for the first six months of 2025 and 2024 to $282.7 million and $207.7 million. Free cash flow was $119.9 million in the second quarter compared with $65.6 million in the prior-year quarter.
As of June 30, 2025, the company had $313.8 million in cash and cash equivalents with a long-term debt of $848.6 million.
Guidance Up
For the third quarter of 2025, Celestica expects revenues in the range of $2.875 billion to $3.125 billion. Non-GAAP earnings per share are expected to be in the range of $1.37-$1.53. Management expects the non-GAAP operating margin to be 7.4%.
With strong quarterly results, Celestica currently anticipates 2025 revenues to be approximately $11.55 billion, up from the previous projection of $10.85 billion. Non-GAAP operating margin is expected to be 7.4%, up from the prior outlook of 7.2%. Non-GAAP adjusted earnings are expected to be $5.50 per share, up from the previous view of $5.00. Non-GAAP free cash flow is expected to be $400 million, up from $350 million expected earlier.
How Have Estimates Been Moving Since Then?
Since the earnings release, investors have witnessed a upward trend in fresh estimates.
The consensus estimate has shifted 14.62% due to these changes.
VGM Scores
Currently, Celestica has a average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a score of D on the value side, putting it in the bottom 40% for value investors.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Celestica has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Celestica belongs to the Zacks Electronics - Manufacturing Services industry. Another stock from the same industry, Plexus (PLXS), has gained 6.3% over the past month. More than a month has passed since the company reported results for the quarter ended June 2025.
Plexus reported revenues of $1.02 billion in the last reported quarter, representing a year-over-year change of +6%. EPS of $1.90 for the same period compares with $1.45 a year ago.
Plexus is expected to post earnings of $1.84 per share for the current quarter, representing a year-over-year change of -0.5%. Over the last 30 days, the Zacks Consensus Estimate has changed +1.9%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Plexus. Also, the stock has a VGM Score of A.
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Celestica, Inc. (CLS): Free Stock Analysis Report Plexus Corp. (PLXS): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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